Post by scoop q on Nov 11, 2011 11:38:17 GMT -5
Probe Firm tied to Times Leader says it will no longer invest in media
By Denise Allabaugh (Staff Writer)Published: November 11, 2011
In a statement, Dallas, Texas-based HM Capital said it will turn away from investing in media and focus exclusively on food and consumer products which it calls "an area of core strength for the firm," while it labels media a "troubled area." The statement was published in Buyouts, a magazine that reports on the private equity industry.
Jim David, a spokesman for HM Capital, said the statement means the firm will not make any "new media investments, but it will continue to work to maximize the value of its existing investments." He would not answer further questions, including what the announcement means for The Times Leader in Wilkes-Barre.
HM Capital and other investors backed Connor in the $65 million purchase of The Times Leader in 2006 from McClatchy Newspapers and of the Portland Press Herald/Maine Sunday Telegram, the Kennebec Journal and the Waterville Sentinel, now parts of MaineToday Media, from the Blethen Company in 2009. The price of that deal was not disclosed.
In addition to the newspapers, HM Capital has other media investments including Choice Cable TV in Puerto Rico, LIN Media in Providence, R.I.; UniTek Global Services in Blue Bell, Pa. and Ziplocal in Orem, Utah.
Veteran newspaper industry analyst John Morton interpreted the statement from HM Capital to mean the private equity firm will not look at newspapers when in comes to further acquisitions.
"It's not a good time to sell a newspaper," Morton said. HM Capital's newspapers are probably underwater, he said.
The statement and Connor's plan to resign calls into question what will happen at The Times Leader, Morton said.
"It's going to be a difficult situation. I don't want to predict the deaths of newspapers, but clearly newspapers are in a difficult position," he said. "It's tougher for newspapers to survive, especially when you're going head to head with another newspaper."
For Scott Lynett, HM Capital's statement was not surprising.
"They are facing major challenges in Wilkes-Barre and Maine, their only two newspaper investments," said the publisher of The Citizens' Voice, The Times-Tribune and the Hazleton Standard Speaker and CEO of Times-Shamrock Communications.
"Having paid $65 million for The Times Leader in 2006, I don't see how they are going to create attractive returns for their investors," Mr. Lynett said. "I don't know The Times Leader's ad revenues. However, we do know that The Times Leader has lost quite a bit of advertising lineage in the last couple years, while The Citizens' Voice has gained lineage. I think it is safe to assume that this loss of lineage indicates that The Times Leader has lost a good chunk of their ad revenues."
Lynett said advertising is the lifeblood of a newspaper, making up 70 to 80 percent of revenues.
"Lose too much ad revenue and a newspaper can't survive," Lynett said.
Connor announced Oct. 28 that at the end of this year, he will resign as editor and publisher of The Times Leader and as CEO of MaineToday Media.
He did not return a call for comment. Other known local investors in The Times Leader: Frank Henry, the chairman of the Wilkes-Barre-based Martz Group; Hal Flack of Diamond Manufacturing in Wyoming, and Charles Parente, chief executive officer of Wilkes-Barre-based Pagnotti Enterprises, did not return calls.
Connor's announcement had followed recent layoffs at both newspapers. Within the last few months, The Times Leader has dismissed a photographer, a graphic artist and a multi-media editor and hiked health insurance costs for remaining employees. The newspaper dismissed at least two more employees in its circulation department, according to a source.
In Maine, the CEO of MaineToday Media announced in October that 38 workers at The Portland Press Herald/Maine Sunday Telegram would be laid off and another 23 workers have agreed to voluntary buyouts. In a statement, Connor blamed a decline in advertising revenue for the cuts, the bulk of which were coming from the news department.
Long-time media analyst Edward Atorino of the New York-based Benchmark Co. said he was not surprised by HM Capital's decision to discontinue investing in media since newspapers were hit hard by the recession and advertising revenue declined.
Atorino predicts there could be more layoffs if advertising revenue continues to drop. When asked if The Times Leader could close, Atorino responded "Eventually yes, unless advertising stabilizes or they can restructure the business."
dallabaugh@citizensvoice.com